The COVID-19 pandemic should have been a golden opportunity for food delivery apps such as Grubhub, DoorDash, Uber Eats, and Postmates. Thanks to months of lockdown and limited dining options, both restaurants and customers have come to rely on takeout and delivery. But instead of filling a valuable need in the marketplace, the reality of using online delivery services has been fraught with problems, and some restaurants say these services threaten their very survival.
As the food delivery apps battle for market share, restaurants are often finding themselves the unwitting victims. Fees paid by restaurants can be exorbitantly high, ranging from 10% to 30% of the cost of the order. For smaller independent restaurants, especially those who believe they have no choice but to use online delivery services to survive, the costs are so high that some may be forced out of business.
Fees are not the only concerns that restaurants have. A number of restaurant owners are reporting that delivery apps are engaging in deceptive practices such as listing restaurants on their websites and accepting delivery orders without the restaurant’s consent. Most of these online services claim that they are doing restaurants a favor by providing free advertising and increased visibility. However, the menus posted for non-member restaurants are often out of date or inaccurate, leaving restaurants struggling or unable to fill orders. When an order is unavailable or isn’t delivered, customers blame the restaurant, leading to poor reviews even though the restaurant had nothing to do with it.
Although most apps claim that they will remove the unauthorized listing if the restaurant requests, many are finding that listings are not removed even after multiple requests. In some cases the listing is deleted, only to show up again later on. Some restaurants may even believe that they have no choice but to subscribe to the service simply to regain some control over orders and avoid further harm to their reputations. Multiple lawsuits have been filed around the country as a result of these deceptive practices. In August, Maryland-based pizza chain Ledo Pizza filed a lawsuit against Uber Eats for trademark infringement, alleging that Uber Eats listed Ledo’s trademark and menu on its website without Ledo’s permission.
Restaurants spend too much time and attention building their brands to see them devalued by unsanctioned use. Taking steps to stop the unauthorized use of their trademarks may be an important part of the restaurant’s long-term survival plan.
For more information, contact the Davis, Agnor, Rapaport & Skalny attorney with whom you typically work, or one in our Business Planning & Transactions Practice Group.
